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A bond contract feature that requires the issuer to retire a specified portion of the bond issue each year is called a sinking fund provision.
A bond is debt instrument that gives the holders a right to earn an interest at prespecified periods and and at the maturity of the bond, investors would received the amount invested. A bond contract contains features of the bond.
A sinking fund provision is when the issuer of a bond sets up a fund or account where he/ she deposits money that she intends to use to pay back investors at the maturity of the bond. A sinking fund provision increases the confidence of the investors in the ability of the bond issuer to be able to pay back the amount borrowed.
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